Russia's economic forecast sharply reduced

August 24, 2012, 13:08 UTC+3this year’s inflation will reach 7 percent instead of 5-6 percent, while the world oil price will stand at 109 dollars per barrel instead of the planned 115 dollars per barrel

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MOSCOW, August 24 (Itar-Tass) — Russia’s Economic Development Ministry sharply reduced this year’s economic forecast naming two reasons – a drought-caused food factor and the weakening of the ruble. According to a new forecast, this year’s inflation will reach 7 percent instead of 5-6 percent, while the world oil price will stand at 109 dollars per barrel instead of the planned 115 dollars per barrel. Moreover, the capital outflow is expected instead of its influx.

“The forecast for lower economic growth is not a surprise, as before these forecasts were too optimistic,” the Novye Izvestiya quoted Investcafe analyst Anatoly Safonov as saying. “I remind that in the second quarter of the year Russia’s economic growth rates made up 3.9 percent, when in the first quarter they stood at 4.9 percent. At the same time the risks of the slowdown of Russia’s industrial production remain, as there are practically no positive trends.” He forecast that the country’s inflation will make up no less than 6.5-6.7 percent. The main factor for accelerating prices will be higher public utility and housing tariffs as of September 1.

“This is most probably a delayed statement of facts,” the head of AForex analytical department, Nikolai Korzhenevsky, was quoted by the Nezavisimaya Gazeta as saying. “I do not think that reconsideration of figures is caused by a pressure exerted by colleagues from other departments. This is a traditional inert style of the ministry’s work.” At the same time the analyst believes that the Economic Development Ministry overstated the inflation forecast. “In 2012 I expect 6.3-6.5 percent,” Korzhenevsky said. “The food factor is seasonal and it is unlikely to affect prices as to the rest of the year. The weakening of the ruble also stopped and should not resume in the upcoming months. However, there is the pressure from artificial decrease in the money supply by the Central Bank. Moreover, there is no influx of capital and there are no reasons to expect it within the remaining months.” The expert predicted that the GDP would stand at 3.7-3.9 percent “and it is difficult to say something more original about this.”